* New fund expected to concentrate on acquisitions
* Slowing capital markets, new regs use of M&A in China
* Companies "can consolidate or be consolidated"-Tang
HONG KONG, Nov 14 Hong Kong-based private equity
firm Fountainvest Partners, headed by ex-Temasek
executive Frank Tang, has raised $1.35 billion for its second
fund focused on Greater China, sources familiar with the matter
said, defying increasingly tight fundraising conditions.
Founded in 2007 by four former Temasek executives from the
Singapore state investor's China team, Fountainvest raised a
debut fund of $950 million in 2008.
Since then, the fundraising climate in Asia has deteriorated
as pension funds and endowments have been disappointed with
returns from the last batch of funds they seeded in the region,
making them cautious about putting money into new funds.
Still, Fountainvest was able to raise the new funds in a
relatively quick eight months, one of the sources said.
There are now more than 5,000 private equity funds in China,
with $261 billion of capital raised and $126 billion invested
since 2006, according to a Deutsche Boerse report released this
The new fund, Fountainvest China Growth Capital Fund II LP,
will invest in high-growth businesses that need between $50-200
million of equity.
Fountainvest invested in U.S.-listed Sina Corp and
Zhaoheng Hydropower Co among others from the first fund.
Fountainvest officials declined to comment. The sources
declined to be identified as the information was not public.
The firm is currently involved in buyout deals of two
U.S.-listed Chinese firms - a $3.5 billion bid for display
advertising firm Focus Media Holding Ltd and a $635
million offer for budget hotel chain 7 Days Group Holdings Ltd
Several high-profile funds, including, Washington State
Investment Board, San Diego County Employees Retirement
Association, Temasek Holdings, California State Teachers'
Retirement System, and Canada Pension Plan Investment Board have
invested in the new fund, one of the sources said.
The firm is expected to pour more of its money into buyouts
compared to the debut fund, as slowing capital markets and new
regulations encourage private equity to accelerate the use of
M&A in China.
Managing partner Tang earlier this year told Reuters that a
key driver for companies to strike deals is the need to
consolidate China's fragmented industries, where top players
often take less than five to 10 percent market share.
"I think there's going to be industry consolidation going
forward and companies can either consolidate or be
consolidated," Tang said.